OECD Economics Department Working Papers

Working papers from the Economics Department of the OECD that cover the full range of the Department’s work including the economic situation, policy analysis and projections; fiscal policy, public expenditure and taxation; and structural issues including ageing, growth and productivity, migration, environment, human capital, housing, trade and investment, labour markets, regulatory reform, competition, health, and other issues.

The views expressed in these papers are those of the author(s) and do not necessarily reflect those of the OECD or of the governments of its member countries.

Findings of the recent literature on international capital flows

Implications and suggestions for further research

Financial globalisation has given international capital flows a central role in the functioning of the global economy and has therefore led to considerable economic research over the past 30 years. Making the most of capital flows by allowing countries to reap their benefits while reducing associated risks has always been a challenge. This challenge became however even more acute in the past decade: following the Global Financial Crisis new concerns have indeed emerged related to the complexity of global financial relations, their role in shock transmission as well the ability of fundamentals to protect countries from financial instability. Against this background, recent research has focused on understanding better the implications of financial globalisation for economic stability and the design of policies. This literature review assesses these recent developments. After reviewing the most important trends in capital flows over the past decade, it takes stock of the discussion on the role of the global financial cycle in driving cross-border capital flows and financial instability, reviews the new findings on the real impact of international capital flows on recipient economies, and provides an overview of the ongoing debates on the role of capital controls and the need for policy coordination.


Keywords: financial globalisation, cross-border capital flows

F42: International Economics / Macroeconomic Aspects of International Trade and Finance / International Policy Coordination and Transmission;
F21: International Economics / International Factor Movements and International Business / International Investment; Long-term Capital Movements;
F32: International Economics / International Finance / Current Account Adjustment; Short-term Capital Movements